Strategic Analysis of the Full Time MBA Industry

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1 Economics of Competitive Strategy Strategic Analysis of the Full Time MBA Industry Chris Cochran Christopher Coffman Juan Carlos Loredo McCombs School of Business The University of Texas at Austin 30 April 2003

2 I. Introduction The full-time MBA program industry has evolved into a competitive market for talent and prestige. The McCombs School of Business has set a goal of becoming the number one MBA program among public business schools. Given this goal, there are certain implications that must be considered in order for the strategy to be executed successfully. This paper will analyze the full-time MBA program industry, identify economic concepts applicable to the McCombs MBA strategy, and address the robustness and fit of the current recommendations (outlined in the Jemison report) to reach that goal. This report will also point out the special considerations that make this market unique and complex. They specifically include the dual buyer/product perspective, the involvement of outside oversight, and the secondary nature of profits. The timing of this analysis is appropriate given several factors. First, Dean Gau is currently in the process of refreshing the existing strategic plan for the MBA program. Second, two of the three core platforms of the program, entrepreneurship and technology, have come into question due to departing faculty and macro-economic factors. Finally, many competitors continue to reposition themselves to compete more effectively for the same population of applicants. For these reasons, the strategic positioning that McCombs adopts in the near future will have a significant influence on the long-term direction of the program. II. Complicating Factors A thorough industry analysis should be preceded by a review of the factors that complicate the standard classifications and assessments. Dual Buyer/Product Perspective MBA programs serve two primary markets and therefore complicate the standard buyer/supplier relationship in Porter s analysis. Perspective 1: The student as the primary buyer of the product, which can be viewed as both an education and subsequent access to a more attractive pool of job opportunities (broadly encompassing career changes, salary increases, and advancement). Employers are the suppliers of job opportunities and faculty are the suppliers of the education. The existence of two suppliers might imply the existence of two products. However, it seems clear that students value the opportunity component of the product at least as much, if not more, than the education component. Perspective 2: The employer as the primary buyer of MBA talent who has signaled various attributes by attending graduate school. Therefore, the product would be considered an MBA student who has been enriched through a challenging curriculum. Both the student applicant pool and faculty serve as suppliers to create the talent product. 2

3 Criteria Perspective 1 Perspective 2 Buyer - Student - Employers Product - Education - Educated MBA Student - Access to opportunity Suppliers - Faculty - Faculty - Employers - Student Applicant Pool The dual nature of this buyer/supplier relationship is reminiscent of the Fox Broadcasting case in which advertisers were the buyers despite the fact that they did not consume the final programming output. In this situation, however, the buyer is always consuming because the product is either education and access or the human resource itself. The MBA program serves as a value-adding process necessary for the finished product to exist. This is also similar to the combined roles of the producers and networks in the Fox case, where the advertising product is not acceptable unless it comes packaged with programming. Although the student is the primary contributor of funds to the MBA program business model, employers also pay a price to gain priority and access to the talent pool (contributions for facilities, sponsorships, etc.). Therefore program leaders must be cognizant of how the strategic plan or any future recommendation addresses each perspective. Only acknowledging the buyer from one perspective could alienate the other buyer/supplier and hobble the effort of improving the product itself. Outside Oversight & Restriction A factor unique to public universities further complicates standard industry analysis. As a staterun institution, the University of Texas and the McCombs School of Business have budgetary restrictions and processes, outside of their control; both of which can affect their speed and ability to affect change. Although other public universities answer to state legislatures, the degrees of freedom vary from state to state. For example, the University of Michigan Business School has funding for over 40 consortium (minority) scholarships, whereas McCombs has only eight available for next year. In addition, legal issues, such as the Hopwood decision, can also affect a university s ability to reach diversity goals that are valued by employers. Ultimately, Texas is especially restrictive regarding the funding of their public universities; a fact that exemplifies McCombs significant challenges as it seeks to compete with peer institutions. Profit Motivation Budgeting and funding are an issue for public universities, so profits are not the key driver to determining success. In fact profits may be at issue with the fundamental premise of public education. Consequently, price decisions and competition on price are not defining attributes of the industry and cloud the rivalry and power relationships. Ideally, a business school hopes to increase prices as perceived reputation and value increase, but this does not necessarily reflect a profit motive. In the case of many public schools, tuition is controlled by the legislature. Therefore, one can assume that program quality justifies the price and profits are a secondary motive. 3

4 III. Industry Analysis & Context As mentioned above, the MBA program industry entails many complicating factors, but by applying a six forces framework, one is better able to understand the context within which business schools operate. Rivalry - Rivalry is intense for a limited pool of qualified applicants. The main means of differentiating an MBA program, at least for the applicant pool, are the rankings in various magazines. Geographic location and perceived strengths (consulting & general management vs. technical knowledge) are also deciding factors to varying degrees. Consequently, there is some segmentation within the market that helps defuse the rivalry. Within certain parameters, such as the top 20, rivalry is quite high as schools compete for a limited pool of outstanding applicants. Price is a secondary consideration and does not typically mitigate rivalry. New Entrants - New entrants into the traditional business school market are limited. Most educational institutions have already established graduate business education programs at the full-time level. The prestige accorded to older, more-established programs act as an entry barriers and preclude new entrants from entering the top 20. Some attention should be paid, however, to the growing prominence of non-us graduate business schools creating a specialized niche for global education. In general, however, the threat of new entrants into the traditional fulltime program space should be considered low. Substitutes - The primary substitutes for the full-time MBA program are evening, weekend, executive and/or online MBA programs. Many of these programs are offered by the same institutions that offer full-time programs. The availability of substitutes is medium to high but is mitigated by both employer and student perceptions. Part-time programs are seen as methods by which mid-level managers differentiate themselves within their original company. Fulltime students are traditionally looking to change careers, industries and/or roles. Therefore, the two types of students overlap very little from a substitute perspective. Supplier Power - From perspective 1, where the employers are suppliers, power is medium. When employers act as suppliers they supply the opportunities that make students seek an advanced degree. If an employer disapproves of an MBA program s curriculum or output, they can choose not to provide unique opportunities (i.e., jobs) to that business school. This power, however, can only be exercised with a limited scope. Assuming the value of MBA talent remains intact, a company would put itself at a distinct human resource disadvantage by abandoning MBA recruiting across all schools. - The power of suppliers from perspective 2, the qualified applicant pool, is low. Students have a limitless number of schools to apply to. Even considering the level of differentiation among schools (i.e., Top 20, national, regional), there are many choices for applicants. This power comes largely from choice, however, and is mitigated by the non-aggregated nature of 4

5 the applicant pool (i.e., an individual can not exert power over a program by their choice). Consequently, applicants have very limited power to affect tuition prices, program curriculum, or career services. Buyer Power - For perspective 1, where the student is the buyer, power is resides mostly in choice and is low for the reasons cited in the supplier section. - For perspective 2, where the employer is the buyer, power is medium, also cited above. Complements - The sixth force, complements, does have a strong effect on the MBA, but is difficult to quantify. For example, the generally accepted business psychology is that a graduate business education opens doors to advancement, opportunity and compensation. Other complementing factors include the quality of networking at school, life-enriching experiences, and access to a strong alumni base and can help add value to the education. These factors become more important when a bleak job market lowers the potential for lucrative job opportunities and future advancement. These factors are prevalent, regardless of geography, industry and function, so the force can be considered to be high. Force Result: Perspective 1 Result: Perspective 2 Rivalry - High - High New Entrants - Low - Low Substitutes - Medium to High - Medium to High Supplier Power - Medium - Low Buyer Power - Low - Medium Complements - High - High Therefore, the business school market has some unfavorable characteristics, but still provides room to add value. It is important to note that the impact of this market is not measured in reduced profitability, but increased complexity in providing a compelling product, whether the product is an education or an educated student. The premise of this report is different than it would be for a typical business. Opportunity for continued profits is not the driver in the graduate business education market. Instead, the challenge, based on the various forces, is to create an experience that allows one to transcend the limitations of the industry context. IV. Current Direction and Implications for Future Evaluating the draft strategic plan (as set forth by the strategic planning committee) provides a starting point for analysis. In order to discuss how economic principles could be applied (discussed in section V), it is important to review how economic principles have or have not been applied in the current plan. For the purposes of this report, we will focus on section II of the report, which specifically addresses the MBA program (the report can be referenced in Exhibit 2 in the Appendix). The report proposes nine suggestions to improve the MBA program experience and curriculum offerings: 5

6 A. Develop Functional Area Strength B. Improve Core Classes C. Improve Elective Offering D. Change Entrepreneurship Organization E. Build Community Among Students F. Reduce Cohort Size G. Improve CSO H. Increase Student Diversity I. Direct Faculty Hiring For a detailed description, see Exhibit 2 On aggregate, there is little disagreement that the suggestions brought forth in the draft strategic plan are important. The question is whether these suggestions directly propel the program toward achieving its stated goal and whether the strategy ultimately redefines the competitive dynamics in the minds of potential applicants, students and employers. The draft report fails to acknowledge the underlying economic principles that ultimately do influence strategy. For example, recommendations A-E and G-I only seek to strengthen our position in areas that most stakeholders assume McCombs to be currently strong in. Therefore, those recommendations, while valid, do not constitute strategic recommendations. Those recommendations should be characterized as operational suggestions that should be executed, but do not fundamentally alter the competitive dynamics of the industry. In fact, using economic principles like the introduction of incentive compensation and altering the current organizational structure could be used to achieve the goals implied by recommendations A-E, G and I. However, the suggestion to decrease the cohort group is strategic and makes a signal to a variety of parties. First, students are signaled that the program is increasing its standards and entry will be more competitive. Secondly, the suggestion signals the ranking bodies (i.e., BusinessWeek, etc.) that some of the key metrics used to evaluate the program will increase, such as the faculty to student ratio and dollar spent per student. V. Economic Principles The economic principles that apply to this complex industry can be used to construct a sound strategy. Issues that arise pertaining to positioning, organization structure, incentives, cooperation, and differentiation are significant. Positioning One can use the Hotelling line concept to see how the current strategic plan actually positions McCombs. We know from the Hotelling line that in the absence of price competition, rivals should move toward the center in terms of product offering. Conversely, strong price competition suggests that rivals should create distance between their offerings by differentiating. It is agreed that price competition is not the primary driver of competition and hence, the recommendations show a low-level of differentiation from other programs in terms of an education. In conversations with the MBA program administration, this theory was confirmed. Business schools, even direct competitors, tend to look more alike in their educational offerings 6

7 than dissimilar in order to appeal to the widest applicant pool. Therefore, a leadership position is very difficult to attain given that the core educational or programmatic offering is largely the same across institutions. Currently, differentiation tends to take place on factors that are largely out of the control of the business school. For example, geography, proximity to certain industries and reputation of alumni are all examples of factors that serve as differentiators that are not actively controlled by the business school. However, this perspective is very reliant on the theory of the education as the product. When employers evaluate the educated student as the product, price competition (i.e., compensation offered to the student) is important and MBA programs should seek a high level of differentiation between peer institutions. Therefore, business schools should seek a low differentiation when serving perspective 1 and seek a high level of differentiation when serving perspective 2. Organizational Structure One such strategy that specifically addresses the objective of improving student satisfaction involves changing the organization structure of the McCombs program. It is presently organized in a decentralized multidivisional structure, which potentially offers gains in control and research productivity. Each department has autonomy, effectively allowing department heads to determine teaching assignments. Such a structure allows professors to best allocate their time to satisfying required teaching assignments, while focusing energy on publication. However, this organizational structure lacks the ability to control an integrated delivery of output. Because a coordinated educational experience is unable to be delivered, students do not benefit from the similarities and synergies existing across divisional lines. Moreover, the silos in this structure do not easily lend themselves to accountability for the overall product. Rather than allowing each department head, the Ford Career Service, and administration to point fingers when issues arise, the graduate Dean should be given authoritative and exclusive control (within reason) to dictate program objectives, necessary curriculum (i.e. real world cases), and the method by which it should be presented (i.e. Socratic). All of which will serve to better align the program with the demands of the students. Then ultimately, incentives for relevant parties should be tied to the achievement of executable actions designed to execute the strategy of coordinating the McCombs program. That is not to say that incentives should be provided on what is measurable (i.e. rankings) rather than what s important (i.e. teaching quality), since such incentives lead to unintended consequences. Incentives Clearly the university s incentive program works to the disadvantage of both students and recruiters. Compensation in the current structure of McCombs, and most other universities, is in no way tied to the performance of the involved parties necessary to reach its long-term goal. Therefore, the direct driver of student satisfaction, quality teaching, has no correlation with professor s compensation. In fact, their performance is tied almost exclusively to research, a core need of any university, but with very limited relevance to most students who spend 2 years in McCombs classrooms. Therefore, when given the chance to improve teaching or work on publishing, the choice is clear. It can be argued that there is a fundamental misalignment between faculty compensation and the stakeholders (i.e., student and employers) that influence the measure of success (i.e., rankings) 7

8 While the tenure system will undoubtedly prevail throughout this decade and many more to come, other alternatives are available to increase professors incentives to provide a more desirable classroom experience. For example, efficiency wages could be offered to lectures brought in for teaching core classes. Student feedback could be tied to possible tenure reviews. Bonuses could be offered to professors who develop overwhelming demand for their courses or with strong ratings, especially in the core curriculum. Moreover, non-monetary incentives could be offered to professors who perceive a distinct trade-off between research and teaching. Such incentives include additional research assistants and/or limiting future class loads of those teaching professors who excel at and remain in key positions like core classes for a limited period. Ultimately, actions such as these would not only increase the quality of the programming offered, but also provide a signal to potential candidates, the current students, and recruiters that teaching and the course offerings are extremely important to the program. Signaling Signaling can also affect students and recruiters perception of the overall program offering. Northwestern s Dean recently showed his dedication to the students by personally involving himself in the job search. His nationwide tour of businesses in an effort to secure jobs and future recruiting at Northwestern not only increased student satisfaction by providing jobs, but also signaled his long-term commitment to the students. Many students and most recruiters have yet to meet the current Dean of McCombs, George Gau. While his commitment to the overall business school is important, his presence around the school should be as well. Informal communication with the interested parties (i.e. students, teachers, and administration) would likely yield unnoticed insights into issues facing the MBA program. More importantly, however, like the Northwestern example, it would signal commitment. Furthermore, the mere communication of limiting total class sizes and potentially implementing bonus structures, like the one mentioned above, would signal potential and current students of the program s commitment to teaching and education. This dedication should foster a more highly respected reputation and create a chain of events that would positively sculpt the incoming class demographics. An ability to do so, especially if it includes increasing minority candidates in the school, would provide great benefits to recruiters often searching for the ability to fill such vacancies within their corporation. Such examples clearly exemplify how signaling can in turn increase student and recruiter satisfaction, again moving McCombs toward its overall goal. Cooperation A number of opportunities exist for McCombs to cooperate with other MBA programs. A shared interest exists among all schools to place their students in the most desirable jobs. Although students compete to differentiate themselves as the most qualified, all placement offices want the same Fortune 500 companies to at least visit their campus to interview. A central registration process could be implemented to avoid the redundancy and bureaucracy associated with recruiting administration. Business programs within certain regions could coordinate schedules and offer a bundled recruitment package to companies who have traditionally recruited locally (e.g. investment banks in New York primarily recruit from Columbia). Although some schools lose interview slots for their students for one company, they would gain through addition of slots 8

9 from companies venturing to their area for the first time (e.g. energy companies going to the Northeast). Within the McCombs program itself, there are also more qualitative ways to cooperate to provide a more cohesive experience. Many classes cover similar cases from the perspective of different disciplines (i.e. finance, marketing). Joint case discussions would enrich the experience of both classes and encourage a more over-arching, real world teaching method by professors. Differentiation As mentioned previously, differentiating McCombs with respect to other competing business schools must be done cautiously. The Hotelling theory argues that all competing schools in this market end up in the middle to insure satisfying the greatest number of consumers (whether they are defined as students or recruiters), since price competition is effectively absent. With that in mind, any efforts by McCombs to differentiate should be value-adding propositions rather than significant alterations. Moreover, they should be focused on increasing the perceived value of the program and therefore satisfaction of the consumer base (either students or recruiters). Further development and communication of current programs like The Fund, Moot Corp, and the Community Service Practicum and the addition of new programs like Plus would help McCombs reach its goals in two ways. First, without alienating the classic consumers, McCombs will pick up other highly qualified candidates interested in such a value add. Additionally, the expansion of such offerings will likely increase the student s rating of the program upon graduation. Secondly, it will signal the market of McCombs overall commitment to improving the program and keeping up with business trends. Both ways could increase ratings with limited costs or downside risk of lower ratings. Summary Economic Principles The economic principles outlined above build on the recommendations in Exhibit 2, by applying economic principles that specifically addresses the stakeholders needs. In particular, the McCombs administration and advisory council must understand that students and recruiters are relevant for increasing the rankings because appropriate ratings facilitators (i.e. Business Week) place so much emphasis on those groups feedback. Taking this into consideration, McCombs strategic plan must take advantage of economic principles to change the perceptions of the stakeholders in order to alter the competitive environment between MBA programs. 9

10 Exhibit 1: Draft Strategic Report to the McCombs Community McCombs School of Business Strategic Planning Committee Draft Report to the McCombs Community The mission of the McCombs School of Business is to educate the business leaders of tomorrow by developing and disseminating knowledge that will have a substantial impact on business. Texas is a very important State in our national economy and is the home to many important firms. As the only major business school in the region the McCombs School has a central role to play in the economy of our nation and the region. Our goal is to become the best public business school by which we will attract and retain the best faculty; attract and educate the best students; and attract and satisfy the needs of the best employers and corporate partners. We will achieve our goal of becoming the best public business school through a series of coordinated strategic actions that build on the intellectual capital of the faculty, an outstanding group of students, and our support in the business community. Improve curricular rigor and student experiences in our Undergraduate Program Strengthen students experiences and curricular offerings in our MBA Program Increase the impact of our academic scholarship Improve our relationship with the business community Increase the school s resource base This report will: Summarize the Dean s Charge to the Committee Summarize our recommendations for strategic action Provide a more detailed rationale for our recommendations and how we will measure progress Summarize the process the committee used in reaching its recommendations Submitted by the Strategic Planning Committee: Anitesh Barua, Susan Broniarczyk, Jim Dyer, Steve Gilbert, Wayne Hoyer, Dave Jemison (Chair), Lisa Koonce, Marc Meyers (Advisory Council), Paul Newman, Bob Parrino, Bob Peterson, Sheridan Titman, Lynn Utter (Advisory Council), Jim Westphal. CHARGE FROM THE DEAN The Strategic Planning Committee was charged with the task of developing a set of recommendations that will start the McCombs School of Business on a path to becoming the best public business school in the nation. Those recommendations should strive to increase the rigor of our undergraduate program and better align our MBA program with the placement market. Though the university clearly has concerns at this time regarding future funding, the committee was asked to develop its recommendations assuming: (1) the university will not have a 10

11 substantial, long term reduction in its operational budget; and (2) the university will fund its commitment of 30 new tenure-track faculty for the school. The committee was asked to consult with McCombs faculty, staff, students, and Advisory Council members and provide its final recommendations by mid April The dean will then respond to those recommendations and present a strategic plan for the school to be implemented at the start of the academic year. The mission of the McCombs School of Business is to educate the business leaders of tomorrow. Through innovative curriculum, excellent teaching, cutting-edge research, and involvement with industry, the school will bring together the highest-quality faculty and students to provide the best educational programs and graduates of any public business school in the nation. The school will seek to excel in five fundamental business disciplines accounting, finance, information systems, management, and marketing and develop strong capabilities in the supporting discipline of quantitative methods. We will create differentiating academic initiatives in each discipline while also taking advantage of any special opportunities available in supporting academic fields such as entrepreneurship and global business. COMMITTEE S RECOMMENDATIONS To become the best public business school we have identified an integrated set of strategic actions against which we can measure progress. They are: I. Improve curricular rigor and student experiences in our Undergraduate Program II. Strengthen students experiences and curricular offerings in our MBA Program III. Increase the impact of our academic scholarship IV. Improve our relationship with the business community V. Increase the school s resource base VI. Other recommendations 11

12 Exhibit 2: MBA Program Strategic Plan II. STRENGTHEN STUDENTS EXPERIENCES AND CURRICULAR OFFERINGS IN OUR MBA PROGRAM A. Build curricular areas of recognized excellence that reflect the school s strengths and are valued by students and recruiters. Focus on building our core functional areas, for example, finance, marketing, and management (OSSM), based on what MBA students select in their programs. Provide support to areas that are already highly rated (e.g., entrepreneurship, accounting, and IM), and use them to better support and integrate with the core functional areas. We are a full service business school, not a niche player. This recommendation reflects the view of the committee that the McCombs MBA program should focus efforts to improve the curriculum on those areas where there is greatest demand by and for our students. The overwhelming majority of our MBA students accept positions in finance, marketing, or consulting when they leave the McCombs School and we should focus on preparing our students for careers in these areas, as well as providing them general business knowledge that will be useful as they progress in their careers. The focus on finance, marketing, and management (OSSM) is not intended to diminish the importance of the curriculum in areas such as accounting, information management, operations management, or entrepreneurship. An understanding of concepts in these areas is crucial for students who pursue careers in finance, marketing, and consulting. B. Improve core classes (content and teaching consistency) and the core experience. Improving the quality and delivery of the MBA core curriculum was a key recommendation of the outside reviewers. The following recommendations address the concerns raised by the outside reviewers regarding the core curriculum, as well as concerns raised by others in course of the strategic planning process. Recommendations include: 1. Integrate core course content across disciplines. This recommendation recognizes that the most effective education in the MBA core area can only be obtained by coordinating the delivery of key concepts and tools across the various core classes, e.g., by coordinating the discussion of present value concepts across finance and accounting classes and application of these concepts in information management and/or statistics. 2. Get the best possible faculty to teach core classes. The knowledge gained and the experiences students have in the core classes are key factors in the overall quality of their education, the educational environment, students overall satisfaction with the program, and ultimately our placement success. The quality and commitment of core faculty is central to delivery of high quality content and student experiences in the core. 3. Strengthen the cohort culture. A strong cohort culture enhances the students overall educational experience of the students and helps develop greater cohesion among MBA students. 12

13 4. Do a better job of marketing the core classes to faculty and students. Helping students better understand the importance of the various core classes is also a significant element in delivering a high quality educational experience. If students do not appreciate the reason they are required to take a class they will put less effort into it, and the overall quality if the educational experience will suffer. This must be a synthetic whole, beginning during orientation and reinforced by faculty during a student s program. Progress on the above recommendations can be measured by (1) student course evaluations, (2) student satisfaction surveys, (3) cohort activities that take place after graduation. C. Improve our MBA elective offerings. It is important that the improvements in the core curriculum be accompanied by improvements in the MBA elective offerings. The purpose of a core curriculum is to provide students with a common set of fundamental knowledge and skills, and it is important that the elective courses build upon the foundation that is developed in the core. We believe that our elective courses can be improved in several ways: 1. Provide a sense of continuity from core courses to various elective courses and give more guidance to students. Elective course content should follow naturally from the content in core courses. Guidance should be provided to students to help them better understand the relations between core courses and electives and why a particular course might meet their educational goals. 2. Train our students to think more strategically. This goes beyond strategy courses in that every course students take must emphasize the big picture. In addition to teaching technical skills, the MBA program should teach students to think critically and to take a general management perspective when making business decisions. 3. Increase flexibility in the development of courses, particularly in terms of length. As new knowledge in an area becomes available, we should be flexible in encouraging faculty to develop cutting edge, high impact, high demand elective courses. 4. Introduce 1.5 credit courses. Suggestions 3 (c) and (d) are directed at improving the effectiveness and efficiency with which content is delivered in elective courses. Delivering the content for a number of existing elective courses does not require the amount of classroom time available under the current 3-credit system. Allowing 1.5 credit courses would increase the efficiency with which these courses are delivered and would allow for delivery of additional short courses in other areas. Many or most courses may remain 3 credit classes, but right now course design is limited by our having only one mold. Developing 1.5 credit hour courses will require an investment in reconfiguring the University Registrar s system and understanding the impact on faculty. 5. Reexamine the range of elective offerings. Is it better for us to offer more sections of a smaller number of electives? Reducing the overall number of elective courses and increasing the number of sections of the elective courses that are 13

14 offered would make course scheduling less difficult, would facilitate better coordination of content across electives, would improve faculty utilization (fewer faculty would be teaching electives for which there is little student interest), and would increase the ability of students to register for courses that are in high demand. This recommendation is to weigh these benefits against the cost arising from the associated reduction in the number of elective courses available to students. Progress on Recommendations C(1) C(4) can be measured by (1) student satisfaction of elective course offerings, (2) students taking jobs leading to general management positions, (3) the addition of new elective courses that after a few semesters have high demand and are highly rated and (4) the addition of 1.5 SCH courses. D. Alternative forms of organization for and management of the Entrepreneurship Program should be established. 1. Identify a structure that will most effectively facilitate delivery of a highquality entrepreneurship program and related research. The organization and management of the Entrepreneurship program should be reexamined if faculty from across the college and, possibly from other schools at UT, are to participate in this program. Because entrepreneurship is a cross-functional area of study, an organizational structure that provides the flexibility to design and manage an effective and efficient program should be identified. 2. Hiring faculty for entrepreneurship will no longer be the responsibility of the Management Department alone. Departments can propose entrepreneurship faculty that would be grounded in the basic discipline(s) present in a department. The content taught in the entrepreneurship classes bridges all of the academic disciplines and there is no good reason for the entrepreneurship program to be solely the responsibility of the Management Department. Faculty from other departments in the McCombs School can, should, and do contribute to the entrepreneurship program. Progress on Recommendations D(1) & D(2) can be measured by (1) student course evaluations, (2) presence of a McCombs-wide structure for entrepreneurship teaching and research, (3) the number of disciplines represented in the entrepreneurship curriculum. E. Build a stronger sense of community among MBA students. These recommendations were made in response to the recognition that a strong sense of community among MBA students encourages a better learning environment. It also leads to greater identification with, and loyalty to, the McCombs School MBA program. Such a sense of community involves both students and faculty. Ways to build a stronger sense of community include: 1. Encourage faculty who teach in the MBA program to identify with that program. This will lead to a greater sense of ownership and responsibility to the 14

15 MBA program. The importance of this sort of patriotism on the part of the faculty, and the apparent lack of it, is stressed in the external review of the MBA program. 2. Enhance regular and institutionalized lines of communication between students and the administration, particularly the Dean. Better communication between students and the administration improves the ability of the administration to identify and react to student concerns and requirements. The external review of the MBA program points out that our students do not currently feels that they are sufficiently involved in the decision-making process. 3. Physically separate MBA activities as much as possible from undergraduates. Physically separating MBA activities from the undergraduates fosters more direct identification with the MBA program. Separation would enhance the educational experience and help build greater student loyalty to the school. Many of our key competitors are organized in ways that foster much greater student identification with their MBA programs than the McCombs School. Progress on Recommendations E(1) to E (3) can be measured by (1) overall student satisfaction with the program, (2) the implementation of student developed initiatives, and (3) faculty involvement in student-sponsored events. F. Study the implications of reducing the size of the full time MBA program by 70 students (one cohort). This reduction will have several benefits. First, it will allow us to be more selective in our MBA admissions, resulting in an increase in the average quality of incoming students. Second, recruiters will be more satisfied in their hiring process due to the increased selectivity. Third, faculty resources will be freed up for deployment in other areas such as executive MBA programs. On the negative side, however, this move may discourage some recruiters, who may not be able to attract job applicants from a smaller and higher quality MBA pool. Further, a smaller MBA program may imply a loss of tuition for the University, unless the lost semester hours and tuition can be compensated for by other programs. If this reduction takes place, we can judge its success by metrics such as improvement in the distributions of GMAT scores and GPAs of incoming students, the number of job offers per MBA student, recruiter satisfaction with the quality of our students, and the level of faculty resources reallocated to other programs. G. Improve effectiveness of the Career Services Office (CSO). There is a sense that neither recruiters nor students are satisfied. The problems with the CSO are also recognized in the external review of the MBA program, which states The Career Services Office must be redesigned to provide better support as soon as possible. Our recommendations include: 1. Improve general marketing of the MBA program to ensure that the marketplace, including peer schools and faculty, employers, and external ranking sources, recognizes the excellence of the program and the quality of our students. This recommendation recognizes the importance of marketing our students and the MBA program to increase the opportunities for our students, as well as to increase 15

16 the general visibility and perceived quality of the program, which will improve our ability to attract highly qualified students and faculty. 2. Target companies who used to hire our graduates regularly, but who left when the consulting companies moved in several years ago. In the late 1990s, a number of traditional recruiters, many from traditional manufacturing industries, were dissatisfied with their ability to recruit our students and, as a result, cut back on their recruiting efforts targeting our MBA students. The lack of recruiting success on the part of these firms can largely be attributed to greater student interest at that time in their careers in other industries, such as investment banking or consulting. Nevertheless, the extent to which these recruiters cut back on their recruiting efforts at the McCombs School suggests that we may not have done as good a job as possible building and maintaining relationships with them. Over the long run, many of these recruiters are among the mainstay of our placement efforts and we should focus on building stronger relationships with them. 3. Improve the placement process and networking opportunities with McCombs alumni. This recommendation recognizes the importance and potential that our alumni network can play in our student placement efforts. Progress on Recommendations G (1) to G (3) can be measured by student placements in firms which are not currently recruiting at McCombs, alumni networking in recruiting, and the number of MBA applicants (normalized for nationwide applicants). H. Increase Student Diversity. The quality of the MBA educational experience is improved with a more diverse student body. Diversity in this sense encompasses the education, skills, prior experiences, gender, and cultural heritage that students bring to the MBA program. Progress on this recommendation can be measured by the heterogeneity of the MBA student body based on a variety of diversity-related measures. I. Direct faculty hiring to allow us to build core areas in which there is student demand and where we have the opportunity to be distinctive in research. Hiring practices should be consistent with the above objectives in conjunction with the research objectives of the school. 16

17 Exhibit 2 Final Analysis: Strategic Analysis of the MBA Market o Cooperation - Career services between business school - Senior leaders teach class - Customer strategy o Differentiation - Differentiating the experience and not the education - Core processes similar because of hotelling - Plus/Fund/Mott Corp/Community Service/Ethics - Discuss o Incentives - Extra research time and funding for core classes - Students determine tenure as a core professor - Bonuses for core teaching o Organizational Structure - Silo s are limiting interaction - Complete package is what is voted on - Allows better interaction and overall product offering o Signaling - Elissa s comments about not paying enough for education (feel like an inferior product) and expectations for buyer - Look at changes in core metrics - Sculpting incoming class demographics - Faculty/student ratios - Northwestern job hunting 17

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